"A city can really boost its brand if it does the Olympics and does it well," says Jeffrey Rosensweig, an international business professor at Emory University in Atlanta. "People underestimate the power of tourism as an economic engine.... Barcelona was really able to show the world what a great place it is. It's still benefiting so much later."

But, cautions Professor Rosensweig, not every city lives up to the Barcelona model. Montreal, for instance, was left with white-elephant structures that no longer have much use, and a financial loss. Atlanta, the 1996 host, didn't lose money, but "didn't get the kind of spending needed to truly transform the city," says Rosensweig.

Like Atlanta, Chicago has proposed funding the Olympics largely with private-sector money – a move that can stave off criticism of risking taxpayer dollars, but can also make it challenging to fund the major infrastructure improvements needed to remake a city.

The evaluation released by the IOC Wednesday cited a long list of Chicago's weak areas – its transportation plan, budget estimates, and inability to issue a financial guarantee – which the city will need to focus on in the coming year. It ranked third of the four cities selected as finalists, behind Tokyo and Madrid. The early rankings, though, are historically not a good predictor of the final selection.

For now, Chicagoans – including most civic, business, and government leaders – are excited about the prospect of a Windy City Olympics, and note hosting such a major event can pay big dividends in the long run, raising a city's profile and prestige, as well as providing long-term, "legacy" improvements.

"It's not about the days of the Games, it's about how it can transform a city's infrastructure and neighborhoods," says MarySue Barrett, president of the Metropolitan Planning Council, a nonpartisan research and advocacy group in Chicago.

Much of Chicago's Olympic proposal, for instance, centers on South Side neighborhoods largely ignored by urban renewal. And its aging transit system is in need of an overhaul.

An Olympic bid "accelerates strategies that have been talked about for decades," says Ms. Barrett. Next steps include submitting a revised bid in February, before a final decision by the IOC next October

Many leaders are already celebrating, certain Chicago's charms will be irresistible with a more detailed pitch.

"It's the single biggest opportunity to introduce our city to a worldwide audience," says Dorothy Coyle, director of the Chicago Office of Tourism. "Chicago's very passionate about wanting to host these Games."